Define observability expectations for logs, traces, metrics, and correlation

[Subhransu-De]

What to build

Complete the observability story for the template. The project already has Logfire/OpenTelemetry hooks and JSON logs, but it should define what signals are emitted, how they correlate, and what production operators should monitor.

Acceptance criteria

• Documentation explains the current logging, tracing, and SQLAlchemy instrumentation behavior.
• Request IDs or trace IDs are consistently visible in structured logs.
• Metrics strategy is documented, including whether metrics are exported through OpenTelemetry, a vendor backend, or a Prometheus-compatible endpoint.
• Health endpoints are excluded or downsampled intentionally to avoid noisy telemetry.
• Example environment variables for observability configuration are documented.
• A minimal production checklist describes useful dashboards or alerts: error rate, latency, request volume, DB failures, startup failures, and auth failures.

Blocked by

None - can start immediately.